AstraZeneca rejects second takeover bid from Pfizer

British drug company AstraZeneca has rejected a second takeover bid from US firm Pfizer, saying that the new offer still “substantially undervalued” the company.

Pfizer offered AstaZeneca the equivalent of £50 a share, valuing the firm at £63 billion. The firm said that the proposal was “inadequate” and was not a basis for AstraZeneca to engage with Pfizer.

Leif Johansson, chairman of AstraZeneca, said that it continues to “invest significantly” in research, development and manufacturing in the UK, Sweden and US. He continued that the firm showed “strong momentum”, particularly within its “exciting, rapidly progressing pipeline”, which the board believe would deliver significant value for shareholders.

“Pfizer’s proposal would dramatically dilute AstraZeneca shareholders’ exposure to our unique pipeline and would create risks around its delivery. As such, the board has no hesitation in rejecting the proposal”, Johansson added.

Ian Read, chairman and CEO of Pfizer, has argued that combining the companies offers a “highly compelling” strategy and would benefit shareholders of both firms. Pfizer has also written to David Cameron seeking to address concerns and outline commitments.

The letter asserts that should a takeover bid be successful there will be a “long-term commitment to the UK”, including basing key scientific leadership and locating manufacturing operations in the country.

If successful, the firm would benefit from the UK’s lower corporation tax rate, saving it more than $1 billion (£590m) a year. In the letter Pfizer also mentions the UK Patent Box, which offers a tax break for new products developed in the UK.

In addition, AstraZeneca paid £689m, considerably more than it had budgeted, to settle a tax dispute in 2011. Pfizer has also been involved in a number of legal cases in relation to its products.

A number of sustainable funds have one of the companies within their top 10 largest holdings. The Sarasin EquiSar Socially Responsible fund holds a stake in Pfizer. Meanwhile, the Family Charity Ethical, Henderson Global Care UK Income and Scottish Widows Environmental Investors funds all have holdings in AstraZeneca.